According to court documents, Red J illegally stored and transported 32,000 gallons of petroleum-contaminated wastewater treatment sludge without properly registering as a hazardous waste management facility or obtaining a hazardous waste storage permit. Federal and state laws prohibit the storage of hazardous waste for longer than 90 days without a permit.

In February 2005, Red J was notified of test results indicating that the sludge contained benzene and could easily catch fire. Inspectors from the Arizona Department of Environmental Quality discovered that the sludge had remained stored at the Phoenix site until the end of April 2005.